PegaWorld – McKinsey on digitization

McKinsey came on stage talking about digitization. They see that different industries are at different points in the digital disruption. New trends begin and early adopters grow, start transforming mainstream companies and then a tipping point is reached where some incumbents die. So, for instance, disruption of retail banking is just starting while traditional media/video stores, for instance, have already seen the death of incumbents.

Meanwhile consumers are changing. Average customers are increasingly worth less than they used to be while good customers are worth more. Consumer behavior is also changing in unexpected ways, with heavier online banking customers for instance also being heavier users of other channels – they are more multi-channel.

As customers become more omnichannel McKinsey has seen that 77% of satisfied customers use 3 or more touch points while over half of all customer interactions are part of a multi-channel interaction. Increasingly journeys matter more than touchpoints. But this is difficult because variability in execution – inconsistency – both grows in multi channel conversations AND has a negative correlation with customer satisfaction.

As a result organizations need to deliver digital transformation holistically:

• The front end need to be innovated (online, mobile, social)
• So does the back end with process automation (paperless, STP) and decisioning (big data, analytics, real-time responses).
• These feed into innovation which in turn drives back into new changes.

Challenges in doing this can result in “two speed” organizations with the traditional company ticking along while labs and “under the radar” pieces of the organization driving innovation that might, in fact, disrupt the market of the core business. Only 30% of transformations succeed and this seems to be a pretty stable percentage. Getting everyone on board seems to be critical to success so this kind of two-speed approach to digitization may not succeed – it focuses too much on localized change and not enough on getting the whole organization to transform.

McKinsey has identified what it calls the 7 habits of successful digital organizations:

1. Be unreasonably aspirational (mobile, no silos, faster)
2. Acquire new capabilities
3. Ring fence and cultivate talent
4. Challenge everything (reinvent yourself)
5. Be Quick and Data Driven (Decision Management IMO)
6. Follow the money (improve your core to fund initiatives)
7. Be obsessed with the customer (and their journeys)

An interesting set of observations.